Hurdles Ahead for Ethanol Blend Percentage Issue

March 29, 2009 07:00 PM

via a special arrangement with Informa Economics, Inc.

Proponents and opponents step up as EPA considers maximum ethanol blend percentage

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

President Barack Obama has previously said he may have to make the final decision on whether or not – and if so, how much – to increase the maximum ethanol blend percentage for non-flex fuel vehicles, from the current 10 percent maximum. But other hurdles have surfaced.

For example, usually reliable contacts signal that groups representing refiners and small equipment companies have already contacted Clean Air Act lawyers in a possible future effort to seek a court injunction should the ethanol blend percentage be increased. Some automobile and small engine manufacturers have said there is no certainty yet that such an increase in the blend percentage will not harm engines and fuel lines. Boat engines, chain saws, lawn mowers, snowmobiles, motorcycles, generators and other small-engine equipment could be permanently damaged from using a 15 percent ethanol blend, said Kris Kiser, executive director of the Outdoor Power Equipment Institute. "We have very real concerns," Kiser said, including poor engine performance and overheating, according to a recent Milwaukee Journal Sentinel article. Of 28 engines tested by the Department of Energy using 15 percent ethanol, all had significant problems, he said.

But groups that recently submitted a petition to the Environmental Protection Agency (EPA) to boost the blend percent up to 15 percent provided several research reports that support the increase. "Several studies show vehicles on the road today work safely and efficiently with a 15 or even 20 percent ethanol blend,” according to Randy Klein, director of market development for the Nebraska Corn Board. "In fact, some cars performed better on the higher blend. That really isn't a surprise considering that Brazil requires an E25 blend in all conventional cars,” Klein added. Moving from a 10 percent to 15 percent blend would also allow ethanol to replace some 7 billion gallons of gasoline, which is the equivalent of about 350 million barrels of oil. "That is a lot less oil we would need to import into this country,” Klein said, "and replacing gasoline with cleaner burning ethanol would also provide environmental benefits.”

A $497,000 grant to Minnesota State University (MSU) to study ethanol signals that a 20 percent blend appears to be no harder on vehicles than regular gasoline. The study, led by Bruce Jones and Jim Rife in MSU's automotive engineering technology department, tested the effects of different blends of ethanol on the raw materials of a vehicle as well as fuel system parts. Today all gas sold in Minnesota includes 10 percent ethanol. Some gas is 85 percent ethanol (called E85). It is the intermediate blends -- between 10 percent and 85 percent -- that MSU is studying. It is using regular vehicles, not the "flex fuel" models specifically designed to run on high ethanol blends. Jones said research into the 20 percent blend has just been completed. Tests on raw materials -- the metals, plastics and rubber- like substances -- found no problems with the E20 blend. Likewise, fuel pumps using regular gasoline, E10 and E20 were run for 5,000 hours and there was no more wear and tear on the higher- ethanol blend. The research is being done to support a Minnesota proposal to move to a 20 percent blend in all gasoline by 2012.

However, a separate study on the ethanol blend topic was recently released by economists at Mississippi State University. The report's conclusion: "Results of this study argue in favor of approaching any change to current bioenergy policy with considerable caution due to the possibility of severe adverse unintended consequences for other agricultural market participants and, by extension, consumers.” The study by Dept. of Ag Economics economists John Anderson, Daniel Petrolia and John Riley, noted their work adapts an existing model of the corn market to evaluate the short-run effects of an increase in the ethanol blend limit to 12.5 percent, or 15.0 percent on the various components of corn use (i.e., feed use, exports, ethanol production). The report authors wrote that "The potential impacts of even the smaller increase in blend limits are quite substantial, with the potential to deal a further serious blow to the nation's livestock industries at a time when they are already struggling from an extended period of high costs of production and sluggish demand.”

Last week, the National Marine Manufacturers Association submitted requests to the EPA and Department of Energy for testing. The association pointed to disquieting reports from the Oak Ridge National Laboratory in Tennessee, according to an article in the St. Louis Post-Dispatch. Tests last fall on several types of small engines showed that ethanol raised internal temperatures, sometimes considerably. The increased ethanol content caused handheld trimmers to idle faster and engage into gear. Overall, some small engines proved to be more sensitive to ethanol than others. The article noted that at St. Charles Boat & Motor, owner and service manager Jerry Sims used to oversee the rebuilding of 30 carburetors in a year's time. Last year, Sims said, he stopped counting at 750. They were victims, he claims, of ethanol in gas. "It's killing motors right and left," Sims told the St. Louis Post-Dispatch. "But the EPA keeps shoving it down everybody's throats." Others note that existing boat warranties would be voided by use of any alcohol fuel beyond E10.

Responding to boaters, former Gen. Wesley Clark, one of the leaders of Growth Energy, an ethanol proponent lobby group, said that there would be no requirement to use fuel with the higher ethanol blend -- marinas could order the type of fuel that suits them, something marina owners said would be costly and impractical. "We're not advocating a mandatory 15 percent; we're advocating the right to have 15 percent," Clark told the St. Louis newspaper. "A lot of us have a lot of friends up there (in Washington), and we're hoping that the administration will go to 12 or 13 right away. Because that would be a powerful signal" to investors, he said.

Executive and legislative branch officials have indicated support for a blend increase, including House Speaker Nancy Pelosi (D-Calif.) and USDA Secretary Tom Vilsack.

Timing of EPA decision murky. Some sources expect a decision on this topic by the end of summer, with several contacts predicting a slight increase in the blend percentage maximum to 12 or 13 percent. Others signal a decision will likely come late this year. But guessing a timeline on this upcoming decision is just that – a guess.

A hearing on the Renewable Fuels Standard (RFS) will take place this Wednesday. Some mixed views on this topic will likely unfold during the hearing.

It is up to the EPA to lift the cap. Adora Andy, the EPA's press secretary, said in a recent statement, adding that the agency will review a petition request to boost the blend percentage up to 15 percent and "act based on the best available science."

Comments: Opponents of even a small increase in the maximum blender percentage fear that this would be the first of several increases and thus they will oppose even a two or three percentage boost. As you can see from our latest update, this issue is complex with no clear crystal ball. And potential court action makes this topic even harder to predict.

It will be important to know EPA's eventual decision because if it denies the petition for a higher blend percentage maximum, and if President Obama then announces a higher blend, the voices who claimed the Bush administration politicized EPA would be just as loud in a similar charge regarding the Obama administration.


NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.


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